Angel Oak Mortgage-Backed Securities ETF (MBS)
NASDAQ (NMS) NASDAQ (NMS) Primary 
John Hancock Mortgage-Backed Securities ETF Q4 2024 Commentary
MBS underperformed the broader bond market in Q4 2024 due to higher interest-rate sensitivity, despite the Fed's rate cuts. The fund outperformed its benchmark, driven by sector allocation, particularly in non-government-agency residential MBS and asset-backed securities. Security selection and yield curve positioning detracted from performance, with 30-year conventional mortgages and longer duration being notable drags.
Growth & Electronification Could Enhance MBS Opportunities
Given the enormity of its market size, it would serve a fixed income investor well to explore opportunities in mortgage-backed securities (MBS) if they haven't already. The space is expanding and undergoing electronification, making it larger as well as more efficient.
Use ETFs to Access Opportunities Among MBS Investments
Before investing in any particular asset class, investors should do some proper research to better understand what drives its performance. This is especially true for those currently considering investing in mortgage-backed securities (MBS).
Annaly Capital: Improved 2025 Outlook As MBS Spread Compression Raises NAV
Mortgage REITs like Annaly have faced significant losses due to rising long-term interest rates, but high dividends have cushioned the impact. Annaly's book value has been volatile due to duration risk and refinancing risk, but recent mortgage spread compression offers potential for appreciation. Since NLY hedges long-term Treasury rates but not Mortgage rates, the recent spike in Treasury rates may raise its book value without increasing prepayment risks.
FSEC: MBS Fund From Fidelity, Intermediate Duration
FSEC is an intermediate duration fixed income ETF focused on investment-grade MBS securities, with a 5.3-year duration and a 4.34% SEC yield. The fund's performance is highly sensitive to intermediate rates movements, with potential capital gains expected as rates move lower. FSEC's portfolio is predominantly AAA-rated MBS, minimizing credit risk and aligning closely with the iShares 3-7 Year Treasury Bond ETF from a duration standpoint.
MBS Could Be Marvelous Bond Ideas
Following the Federal Reserve's September interest rate cut, mortgage rates surprisingly have not declined. They've actually increased and that might be one of the reasons why mortgage-backed securities (MBS) have retreated in recent weeks.
